This is the second of three article installments running this week through Wednesday. Read the first part here.

Financial Disobedience

Debt fuels crises, taking power out of the hands of all but the financial capitalist class. Yet it also presents an opportunity for a new form of resistance to capitalist exploitation. The threat of crisis can be leverage for debtors.

Experienced alone, debt is isolating, frightening and morally laden with shame and guilt. Indebtedness is being afraid to open the mail or pick up the phone. But as a platform for collective action, debt can be powerful. Consider oil tycoon JP Getty’s adage: “If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” Student debt alone stands today at $1.3 trillion. Together, we can be the banks’ problem.

Let’s think back for a moment to the mortgage crisis, when non-payment of mortgage debts essentially took down the global economy. We can learn several things from this catastrophe. First, it is a great illustration of the centrality of debt payments to capital accumulation and stability today.

Second, these mortgage debts could never have been repaid in the first place. In the financial frenzy of mortgage backed securities, reckless creditors interested only in short-term profit concocted wildly unsustainable lending schemes, selling borrowers mortgage packages they could never have paid off. The failure, in other words, was already baked in; the only question was, who would pay for it?

The bailout ensured that homeowners paid while banks, massive insurance companies, and bondholders were made whole. And homeowners did not lose equally. Quantitative data in the American Sociological Review shows that the mortgage crisis represents one of the largest destructions of the wealth of people of color in U.S. history.

To be clear, it is not simply a matter of the crisis disproportionately impacting diverse populations. Rather, Black Americans have long been the target of economic violence, and 2008 was no exception. At the time, Wells Fargo loan officers devastated entire communities by pushing hundreds of Baltimore area homeowners (referred to as “mud people” by banking staff) with good credit into high-interest subprime mortgages they called “ghetto loans.”

The aftershocks of these practices are still being felt, in Baltimore and beyond. The results of the mortgage crisis were so devastating in part because, while banks and their lobbyists were well-organized to fight for debt relief, the rest of us were not. (“They got bailed out. We got sold out.”) Imagine if the power of mortgage-holders—paradoxically, the power of their collective debt—had been deployed collectively and tactically to retain homes while forcing bondholders and creditors to sustain the losses. That is one potential of a debtors’ union.

Debt Resistance and Higher Education

Aiming to build collective power through debt organizing, but rigorously cautious about the pitfalls, we in the Debt Collective have been nosing our way towards a debtors’ union for a few years. Many of us first started plotting on the streets of Manhattan during Occupy.

We educated ourselves about the nitty gritty of interlocking debt systems by collectively authoring a critical analysis cum financial literacy guide that we called the Debt Resister’s Operations Manual. We gained some unexpected mainstream media attention with our first initiative, the Rolling Jubilee, through which we have now bought and abolished nearly $32 million of medical and student loan debt on the secondary debt market for mere pennies on the dollar.

But these tactics were only preliminary—attempts to undermine two of the weapons in creditors’ arsenals: obscurantism and promissory moralism. When, via the Rolling Jubilee, we chanced upon a portfolio of private student debt from what was then one of the biggest chains of for-profit colleges in the country, Corinthian Colleges Inc., we knew we had found an opportunity to see if a confrontational form of debtor organizing could work.

Higher education offers both an exemplary case study of financialization and fertile ground for contesting that process. During the administration of Governor Reagan in California, states and the federal government began dramatically defunding both public and private universities. That process continued through the 2008 financial crisis and beyond. Early on, defunding was partly a right-wing attack on the institutions that nurtured 1960s radicalism. More recently, it has become a bipartisan class politics and a hallmark of neoliberalism.

While lamenting state cuts to higher education, college administrators have used the funding crisis to take on debt from Wall Street, frequently using tuition as collateral. This allows colleges to fund projects that have nothing to do with education, such as the construction of lavish stadiums and investments in real estate ventures. In league with Wall Street, the schools promise to pay off this debt by hiking tuition, forcing students further into the red.

In addition to turning ostensibly public universities into profit centers for the financial industry, student indebtedness has disastrous socio-cultural effects. Debt forces people to live lives focused on getting out of debt, rather than defining themselves or pursuing their curiosity and passion. Debt, again, becomes a successful disciplinary technique, eliminating life paths that don’t produce for capital.

For-profit colleges take debt-financed higher education to its extreme. Their business model is to attract as many students disenfranchised by the mainstream educational system as possible, compelling them to mortgage their futures in return for subprime educations while funneling federal student loan money to executives and shareholders.

Originally published by Roar